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Walt Disney Co Sheds Light on Its Major Movie Pipeline: What You Need to Know

Disney's studio division is firing on all cylinders, and this is great news for shareholders.

Disney(NYSE:DIS)recently announced some big news for investors -- its films generated over $4 billion in box office receipts year-to-date. This is the third consecutive year in which the Disney studio division has crossed that threshold, but the company managed to do it six weeks faster than in 2014, making 2015 a record-setting year, both in domestic and international markets. Not only that, the company also released its updated movie schedule through 2019, and it looks quite exciting.

Grab some popcorn!Disney has benefited from enormously popular launches this year: Inside Out made over $800 million globally, Cinderella logged over $540 million, while Avengers: Age of Ultron ran away with $1.4 billion, making it one of the highest grossing movies of all time.

Even better, the year is not over yet, and Disney will be releasing Star Wars: The Force Awakens on Dec. 18. Anticipation levels for the next entry in the franchise are off the charts, and everything indicates that it will generate record ticket sales for Disney.

The analysts at Morgan Stanley estimate that The Force Awakens could bring in $650 million in the U.S. and $1.3 billion internationally for a total of $1.95 billion. This is the base case scenario, however, as the investment bank also forecasts total box office receipts coming in $2.25 billion under more optimistic assumptions.

Disney's pipeline of content over the coming years is full of promising launches. Captain America: Civil War is scheduled for May 2016. The company will also launch its Finding Nemo sequel, Finding Dory, in June 2016. The movie will feature Ellen DeGeneres as the voice of the much beloved title character. In addition, Disney has scheduled a Star Wars spinoff, Rogue One, for Dec. 2016.

Emma Watson and Dan Stevens will play the main characters in a live-action adaptation of The Beauty and The Beast which is scheduled for March 2017. The company will also be launching its Guardians of the Galaxy sequel in May 2017, and a new Star Wars movie will be released the same month.

Cars 3 will be reaching the theaters in June 2017, and Pirates of the Caribbean: Dead Men Tell No Tales is scheduled for July 2017. On a longer timeframe, Disney has announced Toy Story 4 to be released in June 2018, and Incredibles 2 will hit theaters in June 2019.

These are just some of the bigger launches to watch -- it should be clear that Disney's movie division is firing on all cylinders.

What this means for investorsThe studio business is a classic example of a hit-or-miss industry: A blockbuster can be enormously profitable, but a flop can be equally damaging (Disney suffered a $200 million writedown following the unsuccessful release of John Carter). Fortunately for investors, the company's brand recognition, tremendously popular franchises, and creative human talent are crucial strategic advantages in the business. There is no such thing as a success guarantee in the movie industry, but relying on Disney's powerful resources is a big plus.

Based on data for the first nine months of fiscal 2015, the studio division brings in nearly 15% of Disney's global revenue. While this is a significant contribution, the number is also understating the true importance of Disney's content creation engine in the overall business model.

The company is a fairly unique player in the entertainment industry, since it gets to monetize its movies via multiple platforms over time. A successful movie fosters home entertainment sales, new attractions at Disney's parks and resorts, broadway shows, merchandising, and TV programming opportunities.

For example, operating income in the consumer products division jumped by an impressive 37% last quarter, mostly fueled by growth from the strong performance of merchandise based on Frozen, The Avengers, and Star Wars.

A successful movie can generate large returns for Disney, both directly and via increased business opportunities in its other segments. The company's studio division looks stronger than ever, and this bodes well for the entire business and its investors.

Author

Andres Cardenal, CFA is a tenacious researcher of the best investment opportunities around the world. Andres is an economist and CFA Charterholder living in Buenos Aires, Argentina. Naturally flavored.
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